Are Debt Collection Companies Regulated in Singapore?

Debt collection businesses are regulated under the Debt Collection Act (DCA) in Singapore. This legislation requires debt collection businesses to have a licence or class licence in order to legally carry out debt collection activities. It also imposes regulations on debt collectors, for example, to ensure that they do not threaten the safety of the debtor.

This article is targeted at individuals who may be interested in learning more about the DCA and how it regulates the debt collection industry. It will cover:

• Whom the DCA applies to
• What debt collection companies need to do under the DCA
• What debt collection companies are not allowed to do under the DCA
• How the DCA will be enforced

To Whom Does the Debt Collection Act (DCA) Apply?

The DCA mainly regulates people and businesses involved in a debt collection activity. A debt collection activity is defined as “any activity undertaken in Singapore that involves finding the debtor of a debt or requesting, demanding or collecting from the debtor money due under the debt”.

In other words, the DCA regulates debt collectors and debt collection companies, whose main business is to help creditors collect money from their debtors. They do so by acting as a middleman and communicating with the debtor to try and convince them to pay up the debt. Debt collection companies can also acquire the debt from the creditor before pursuing the debt from the debtor.

What Do Debt collection Companies Need to Do Under the DCA?

Licensing regime for debt collection businesses

Debt collection companies either need a licence or class licence under the DCA to carry out debt collection activities in Singapore. Whether a business would need a licence or class licence would depend on whether it is a debt collection business regulated by the government. For example, a smaller-scale private enterprise not regulated by the government would have to apply for an individual licence, whereas a large bank regulated by the government would be granted a class licence.

Persons operating a debt collection business which carries out debt collection activities without a valid licence will face a fine of up to $20,000, imprisonment of up to 2 years, or both.

Class licensing regime for lower-risk entities

As mentioned above, an individual licence is not required for entities that are regulated by the government. Instead, a class licence will be granted by the government that may subject them to certain conditions.

These regulated businesses include banks, merchant banks, licensed credit card or charge card issuers, finance companies, and licensed and exempt moneylenders.

Regulated businesses that only need a class licence may be subject to the following possible conditions:

• Restricting the manner the class licensee collects debt
• Prohibiting a class licensee from collecting debt before the class licensee has first ascertained the person is the debtor of the debt
• Requiring a class licensee to only deploy their own employees as debt collectors
• Requiring a class licensee to put in place measures to ensure that their debt collectors only carry out debt collection activities in compliance with:
  • The conditions of the applicable class license
  • All the codes of practice applicable to the class licensee
  • The Penal Code and the Protection from Harassment Act
• Restricting a class licensee from continuing to deploy an employee as a debt collector if the employee has previously failed to carry out debt collection activities in compliance with:
  • The conditions of the applicable class license
  • All the codes of practice applicable to the class licensee
  • The Penal Code and the Protection from Harassment Act
• Prohibiting a class licensee from collecting debts which are not owed to the class licensee

Persons operating regulated debt collection businesses which carry out debt collection activities without a class licence will face a fine of up to $20,000, imprisonment of up to 2 years, or both.

Approval regime for debt collection companies

Debt collection companies must also ensure their debt collectors are approved. To get an approved licence, these businesses must make an application to the Licensing Officer, i.e. a police officer that enforces the DCA.

To make an application, the business must fill in a form, pay a non-refundable application fee, and include in the application any information that the Licensing Officer requires to decide on the application. An application should not be made later than the expiry of a previous licence but if the application is made past a renewal deadline, a non-refundable late renewal application fee must be paid.

If an applicant makes an application with information he or she knows to be false, he or she will face a fine of up to $20,000, imprisonment of up to 2 years, or both.

After an application is made, the Licensing Officer will only grant a licence if the applicant and their key appointment holders are deemed to be a fit and proper person to hold a licence. This is up to the Licensing Officer’s discretion, but considerations on whether an applicant is fit and proper likely depends on:

• Whether the applicant has been involved in criminal proceedings:
  • Under the DCA
  • An offence involving dishonesty
  • Any offence under the Second Schedule of the DCA, such as extortion, criminal intimidation, or gang-robbery
• Whether the Licensing Officer is of the opinion that it is undesirable in the public interest for the business to hold a licence

Approval regime for debt collectors

Individuals who wish to act as a debt collector for a licensed debt collection business (licensee) must first be approved as a debt collector by the Licensing Officer. If the applicant is the debt collection business’ employer or is an “excluded person”, he or she does not need to first be approved as a debt collector.

Excluded persons are entities whose debt collection activities are deemed to pose “minimal law and order risk”. This likely means these entities are unlikely to threaten the safety of others when carrying out debt collection activities. The DCA does not require licences for excluded persons, which include:

• The Official Assignee
• The Official Receiver
• Licensed insolvency practitioners
• Legal-related entities such as regulated legal practitioners and regulated non-practitioners, joint law ventures, licensed foreign law practices, qualifying foreign law practices, and Singapore law practices
• Accounting-related entities such as accounting corporations, accounting firms, accounting limited liability partnerships, chartered accountants, and public accountants

Only individuals who are approved as debt collectors may act as a debt collector for a debt collection business.

To gain approval, an application must be made jointly with the licensee to the Licensing Officer. The Licensing Officer will then determine if the individual is a “fit and proper” person to be deployed as a debt collector. This is up to the discretion of the Licensing Officer, but to determine this, it is likely that the Licensing Officer will assess factors such as:

• Whether the individual has committed offences or breached rules under the DCA
• Whether the individual has been subject to criminal proceedings:
  • Regarding dishonesty
  • Under the Second Schedule of the DCA, such as extortion, criminal intimidation, or gang-robbery
• Whether the Licensing Officer is of the opinion that it is undesirable in the public interest for the individual to be approved as a debt collector

The findings of the factors above would also lead to the immediate suspension of the approval of a debt collector.

When granting approval of a debt collector application, the Licensing Officer may impose conditions on the licensee or individual. These conditions include requiring the licensee or individual to provide notification of any change in particulars of the individual, and requiring the licensee to take reasonable steps to ensure that the individual carries out debt collection in compliance with certain conditions.

These conditions can also be modified by the Licensing Officer, but he or she must notify the licensee and individual of the modification and give at least 14 days for the licensee and individual to write to the Licensing Officer objecting to the proposed modification. If the Licensing Officer still insists on making the modification to the debt collector application, he or she must notify the licensee or individual of the time required to comply with the modification.

A debt collector who contravenes these rules will face a fine of up to $10,000, or imprisonment of up to 12 months, or both.

What are Debt Collectors Not Allowed to Do Under the DCA?

Under the DCA regulations, debt collectors are not allowed to use threatening debt collection methods, such as using threatening words or behaviour towards the debtor or another person (such as a family member of the debtor) or make any threatening communication to the debtor or other person. In addition, a debt collector must not, when collecting debt, display any sign that contains any threat of unlawful violence to the victim. An example of this would be making a motion towards one’s throat to threaten the debtor with physical harm, or handing the debtor a letter threatening harm if the debtor does not pay up.

Also, a debt collector is not allowed to send a text message to a debtor threatening to cause physical harm to the debtor unless they repay the debt, or shout at a debtor or his or her family threatening to beat them up unless the debt is repaid.

Errant debt collectors who commit these prohibited acts will face a fine of up to $10,000 and imprisonment of up to 12 months or both.

Other than the above restrictions stated in the DCA regulations, debt collectors are not allowed to engage in general illegal conduct such as, but not limited to:

For more information, please view our article for a more detailed discussion on the do’s and don’ts of a debt collector in Singapore.

How Will the DCA be Enforced?

The government may appoint a policeman as a Licensing Officer and other policemen to enforce the DCA. These policemen who are authorised to enforce the DCA are also known as inspecting officers.

The Licensing Officer may also appoint a non-policeman as a compliance officer to enforce the DCA as well. Such compliance officers must carry an identification card when enforcing the DCA and will be under the direction of the Licensing Officer. These compliance officers do not have the powers of arrest, to conduct searches, or seize any property.

Inspecting officers are allowed to enter any premises occupied by a person reasonably believed to be connected to the conduct of any debt collection business to search and examine the premises. They are also allowed to seize any object that might be connected to a breach of the DCA if they have a warrant from a Magistrate’s Court or District Court.

Inspecting officers can also:

• Require a person who is reasonably believed to have contravened the DCA to produce personal identification
• Require a person who is reasonably believed to have contravened the DCA to produce any document or article that might be connected to a contravention of the DCA, and to provide an explanation of the information
• Require a person who is reasonably believed to have contravened the DCA to report to an inspecting officer or compliance officer
• Examine orally a person who is reasonably believed to have contravened the DCA

Those who refuse to comply with any of the enforcement procedures listed above will face a fine of up to $10,000. If a person destroys any evidence (such as a document showing the debt owed to the creditor) that has been required by an inspecting officer, he or she shall also be guilty of an offence and face a fine of up to $10,000, or imprisonment of up to 12 months, or both.

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In summary, the DCA acts as a comprehensive guide on the requirements that a business must first comply with to engage in debt collection services. This will allow debtors to ensure that a business requesting the collection of debt from them is doing so in accordance with the law.

If you are facing issues with debt collection and need further guidance or advice on the DCA, you may wish to consult a debt recovery lawyer for assistance.